Question
Dividends are best defined as: \( \begin{array}{l}\text { a. cash or stock payments to either bondholders or shareholders. } \\ \text { b. cash payments to shareholders. } \\ \text { d. cash or stock payments to shareholders. } \\ \text { e. cash payments to either bondholders or shareholders. }\end{array} \)
Ask by Hodgson Griffiths. in the United States
Mar 12,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Dividends are cash or stock payments made to shareholders.
Solution
To determine the best definition of dividends from the provided options, let's analyze each choice:
- **a. cash or stock payments to either bondholders or shareholders.**
This option is incorrect because dividends are specifically payments made to shareholders, not bondholders.
- **b. cash payments to shareholders.**
This option is partially correct, as dividends can be cash payments, but it does not include stock dividends.
- **d. cash or stock payments to shareholders.**
This option is correct because dividends can indeed be distributed in the form of cash or stock to shareholders.
- **e. cash payments to either bondholders or shareholders.**
This option is incorrect for the same reason as option a; dividends are not paid to bondholders.
Based on this analysis, the best definition of dividends is:
**d. cash or stock payments to shareholders.**
Answered by UpStudy AI and reviewed by a Professional Tutor
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Simplify this solution Extra Insights
Dividends are typically considered the share of profits that a company distributes to its shareholders, often in the form of cash or stock. While many companies opt for cash dividends, others may choose to provide stock dividends, which can be a strategic move to conserve cash while still rewarding investors. In real-world application, dividends play a significant role in investment strategies. They can provide a steady income stream for investors, particularly those looking for stability, such as retirees. Companies that consistently pay dividends are often viewed as more stable and financially healthy, attracting a broader base of investors.
